Currency: Paper trails

The Reserve Bank of India has announced withdrawal of currency notes issued before 2005.

In a bid to gradually move people away from using cash to cards, and to ensure that later versions with enhanced security features are in circulation, the Reserve Bank of India has announced withdrawal of currency notes issued before 2005. The move comes months after RBI announced that plastic notes would be introduced on a trial basis. At least seven countries are already using plastic notes. Last December, The New York Times reported that one of the biggest inventions, currency note, is on the decline as the British pound, printed on paper for 300 years, will now be made from plastic, which is harder to counterfeit.

Why plastic
Plastic bank notes will last at least four times more than normal currency notes. Besides, the technology in printing plastic notes involves a very sophisticated process, making manufacture of duplicate notes difficult and thereby controlling distribution of fake notes. They are considered more eco-friendly than paper notes. Also, writing or scribbling on plastic notes is difficult and hence, there are less number of defaced notes. These notes are not ‘foldable’ like paper notes and unfurl immediately if an attempt is made.

History
Polymer banknotes are made from polymer such as biaxial-oriented polypropylene. Such notes incorporate security features not available to paper banknotes like metal threading and meta-meric inks. Plastic money started in 1967 when the Reserve Bank of Australia found fake Australian $10 dollar notes in circulation. In 1968, the RBA started collaborations with the Commonwealth Scientific & Industrial Research Organisation and the University of Melbourne. Modern polymer banknotes were first issued in 1988.

In favour of switch

Australia: In 1996 Australia became the first country to have a complete series of polymer notes. It is difficult to copy the feel, springiness and special features of these polymer notes. The technology, called Guardian, is produced by Securency Pty Ltd.

Canada: The country completed the transition from paper to plastic in 2013. The main reason was rise in counterfeiting. Bank of Canada claimed these notes cannot melt as they had been tested in temperat-ures as high as 140 C.

Not everyone is enthusiastic
In August 2012, Nigeria’s Central Bank attempted to switch back from polymer to paper banknotes as there were ‘difficulties associated with processing and destruction of polymer banknotes’ which had ‘constrained the realisation of benefits expected from polymer banknotes over paper notes’. However, the process was halted in September 2012.

Plastic notes in India?
In May last year, former RBI governor D Subbarao announced during an interactive session that the bank would soon introduce plastic currency notes on a pilot basis. The decision was taken with a view to elongate life of bank notes. He noted that plastic currency has a longer shelf-life and is more environment-friendly than paper notes. Initially, it has been decided, one billion pieces of Rs 10 notes in polymer/ plastic would be introduced on a trial basis in Kochi, Mysore, Jaipur, Bhubaneswar and Shimla.